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"The words of my book nothing, the drift of it everything."
Walt Whitman

The “sharing economy” seeks to empower consumers by freeing them from the burdens of ownership. The savvy CEO may wonder: How can the collaborative crowd distinguish counterfeit product from my trusted trademarked or copyrighted products? How can my company remain profitable when consumers eschew new branded goods and services? In fact, the CEO should take comfort in knowing that the brand’s intellectual property remains relevant and valuable in the sharing economy.

Companies like Lyft, Uber, and AirBnB and hundreds of startup businesses have taken advantage of social media technology to meet consumers’ demand for sharing. At the same time, major brands, like Patagonia, BMW, and Marriott, have entered this space, launching innovative branding platforms to remain relevant. Ironically, the sharing economy offers unique opportunities for traditional companies who have well-known, high quality products or services.

Defining Characteristics of the Sharing Economy

Indeed, the sharing economy thrives only in an atmosphere of trust. In fact, the Federal Trade Commission’s November 2016 report on the sharing economy focuses on trust mechanisms that facilitate seller and buyer satisfaction. The crowd’s testimonials and peer confirmation fuel the sharing economy as much as, if not more than, brands’ own marketing efforts. Reputation rating systems and related technologies feed day-to-day consumption, rather than traditional advertising models. Inevitably, brands relinquish some control over the channels of distribution in the sharing economy.

The collaborative nature of the sharing economy, thus, seems to clash with intellectual property’s monopoly concepts. At the same time, however, a recognizable trademark still assures consumers that a product or service can be trusted to deliver a predictable, reliable level of durability and performance.

The sharing economy suggests changes to the way companies do business, the way consumers interact with brands, and the expectations consumers have for their lives. Companies need to adapt if they are to thrive in this new world, sharing their proprietary rights while standing guard against interlopers. By proactively joining the sharing economy and leveraging their trusted intellectual property, traditional brands may increase sales and further develop their intellectual properties’ good will and value. Concurrently, they should seize the opportunity to shape the legal landscape, the marketplace, and the peer-to-peer mindset.

Guidance for CEO and other C-Suite Executives

As brands transition into the sharing economy, they should not disguise themselves as just “one of the crowd.” Instead, they should utilize both traditional and new technologies to disseminate a message that they are, indeed, still relevant.

To maintain the value and strength of their intellectual property, the following principles should guide the CEO and other c-suite executives:

  • Be vigilant to ensure proper usage of trademarks.
  • Enforce existing intellectual property licenses.
  • Develop creative licensing strategies for businesses marketing your goods and services. Make sure those license agreements have robust quality control measures to protect reputation and prevent abandonment of intellectual property.
  • Police the marketplace for false impressions of affiliation.
  • Partner with sharing providers to offer certification programs that provide assurances to the consuming crowd.
  • Consider launching new divisions or purchasing companies, allowing them to operate under the umbrella of your trusted brand, so as to better control distribution channels.
  • Stay ahead of the curve by utilizing cutting edge techniques, such as native advertising, experiential marketing, gamified content, virtual reality, and co-branded relationships.
  • Recognize that regulators are watching to ensure that consumers are not deceived. All advertising and marketing campaigns, no matter how innovative, remain subject to existing regulations for commercial speech.
  • Work with other industry members to establish ethical marketing practices that foster consumer confidence and discourage regulators from taking action specific to this marketplace.
  • Think strategically before approaching intellectual property infringers. Look for ways to avoid social media backlash by collaborating with those seeking to leverage your brand’s equity.

For a more in-depth look at the issues presented in this article, please see COLLEN’s white paper on the subject.

 

 

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With the inauguration of President Trump, I have four broad predictions about consumer protection under the new administration.

1. Federal agencies will narrow their scrutiny of businesses.

Chairwoman Edith Ramirez resigned from the Federal Trade Commission (FTC), effective February 10, 2017. Ramirez was an Obama appointee, and under her leadership, the FTC stepped up its enforcement activity to protect consumers. On January 25, 2017, President Trump announced that he was appointing Maureen K. Ohlhausen as acting Chair. Ohlhausen has objected to FTC investigations that impede business with “overreaching” discovery. In accepting her designation by President Trump, she said, ” I will ensure the commission minimizes the burdens on legitimate business as we carry out this vital work.” Ohlhausen’s appointment suggests we may see the FTC narrowing its interest in consumer protection. The FTC may limit its focus to those campaigns that have dramatic economic impact. In addition, in pursuing “unfair” commercial speech, Trump’s FTC may re-examine the definition of what is unfair. President Obama’s FTC constantly balanced innovation with its negative impact on the consumer. President Trump’s FTC may be less interested in finding that tipping point.  In short, FTC enforcement priorities may change.

Other federal consumer protection agencies may also switch to a pro-business stance.

  • First, due to pending litigation (PHH Corp. v. CFPB (D.C. Cir. Court of Appeals October 2016), President Trump may be able to remove the current director of the Consumer Financial Protection Bureau before his term ends in 2018. We can expect a less aggressive consumer protection agency under a Trump appointee. Furthermore, the current CFPB had proposed a prohibition on arbitration clauses containing class action waivers. This regulation seems less likely to be enacted in the Trump administration.
  • Second, the Federal Communications Commission (FCC), which had worked to strengthen consumer privacy under President Obama, may reverse or change course. ISP’s may find themselves with increased ability to monetize their access to consumer/user data. In addition, whereas President Obama’s FCC focused on net neutrality, the pendulum may swing the other way.
  •  Third, The Consumer Products Safety Commission (CPSC) receives bi-partisan support in its efforts to protect children. It is unlikely, therefore, to shift its priorities. At the same time, we may see new appointees, lower financial fines, and perhaps even less federal funding for the CPSC’s efforts. On January 19, 2017, Commissioners at the CPSC elected Anne Marie Buerkle to be the next vice chair. She would take over as Acting Chair should current CPSC Chair Kaye step down or is asked to leave. Buerkle has opposed openly the CPSC’s proposals to increase civil penalties and modify the voluntary recall program, among other initiatives.

2. State AG’s will broaden their approaches to consumer protection.

At the same time, state attorneys-general will pick up the regulatory baton that Ramirez’ FTC and other federal agencies threw to them under President Obama. In particularly progressive states, for example NY, California, or Massachusetts, we are likely to see an increase in regulatory attention to commercial speech that dupes consumers. The result may be a hodge-podge of regulatory activity that is more fragmented than it was under President Obama.

3. The NAD will take an activist role in policing commercial speech.

The National Advertising Division of the Council of Better Business Bureaus (NAD) is part of the advertising industry’s self-regulatory system. Advertisers may challenge their competitors’ campaigns before the NAD, or the NAD may bring its own independent investigations. Historically, the NAD has taken an active role in curtailing advertising that may confuse or deceive consumers. Industry members frequently comply with the NAD’s recommendations, even if they do not have rule of law, either because the NAD may refer matters to the FTC, to avoid further litigation, or to preserve their reputations with their customers.

Under a Trump administration, the NAD is likely to re-commit to protecting consumers. Given their desire to promote “an honest and open playing field in advertising,” NAD will continue its work to demand proper claim substantiation from advertisers and ensure that consumers understand that they are interacting with advertising materials. Native advertising will continue to be a point of interest for NAD, and consumer products will remain high on their watch list.

4. Change Takes Time, but smart marketers will use their time wisely.

Even with a Republican dominated Congress, the Trump administration can only move so fast to change courses. Agency rule-making commonly takes years. It is unlikely that President Trump will be able to make the bureaucracies move much faster. If President Trump only serves one term with a Democratic successor or if the Democrats prevail in the midterm elections, his effect on consumer protection may be short-lived. Nonetheless, businesses that want to stay ahead of the curve will  prepare. They will consider the possibility that their marketing campaigns may remain under scrutiny. For national advertisers, the trend towards more local enforcement will likely require more significant legal vetting of campaigns. Local business owners also should be watching the political landscape in their states to determine what resources they need to ensure their advertising and marketing campaigns do not invite regulatory scrutiny.

 

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DMCA Update: Act Now to Maintain Legal Safe Harbor

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FTC Assault on Lord & Taylor Follows Viral Product Bomb Campaign

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Industry members were surprised to see swift enforcement of the FTC’s Native Advertising Enforcement Policy, disseminated in December 2015. On March 15, 2016, the FTC announced its first consent order under this policy. Retailer Lord & Taylor (L&T) had run a highly successful social media “product bomb” campaign in March 2015 to launch its apparel […]

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